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    Inputs From Income Statement:: Total Revenue

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    carminat
    This document shows calculations to determine Domino's incremental fixed capital investments from 2014-2019. It calculates gross fixed capital as capital expenditures plus acquisitions, then subtracts depreciation to find net fixed capital investments. It also calculates Domino's incremental fixed capital investment rate for each year by dividing net fixed capital by incremental revenue. Over the 5 year period, Domino's invested 11.6% of incremental sales into fixed capital.

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    Inputs From Income Statement:: Total Revenue

    Uploaded by

    carminat
    36 views6 pages
    This document shows calculations to determine Domino's incremental fixed capital investments from 2014-2019. It calculates gross fixed capital as capital expenditures plus acquisitions, then subtracts depreciation to find net fixed capital investments. It also calculates Domino's incremental fixed capital investment rate for each year by dividing net fixed capital by incremental revenue. Over the 5 year period, Domino's invested 11.6% of incremental sales into fixed capital.

    Original Description:

    Michael J. Mauboussin

    Original Title

    Online+Tutorial+5

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    This document shows calculations to determine Domino's incremental fixed capital investments from 2014-2019. It calculates gross fixed capital as capital expenditures plus acquisitions, then subtracts depreciation to find net fixed capital investments. It also calculates Domino's incremental fixed capital investment rate for each year by dividing net fixed capital by incremental revenue. Over the 5 year period, Domino's invested 11.6% of incremental sales into fixed capital.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    36 views6 pages

    Inputs From Income Statement:: Total Revenue

    Uploaded by

    carminat
    This document shows calculations to determine Domino's incremental fixed capital investments from 2014-2019. It calculates gross fixed capital as capital expenditures plus acquisitions, then subtracts depreciation to find net fixed capital investments. It also calculates Domino's incremental fixed capital investment rate for each year by dividing net fixed capital by incremental revenue. Over the 5 year period, Domino's invested 11.6% of incremental sales into fixed capital.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 6

    Inputs from Income Statement:

    2013 2014 2015 2016 2017 2018 2019

    Total revenue 1,802.2 1,993.8 2,216.5 2,472.6 2,788.0 3,432.8 3,618.8

    Inputs from Cash Flow Statement:

    2014 2015 2016 2017 2018 2019

    Depreciation and amortization 35.8 32.4 38.1 44.4 53.7 59.9

    Capital expenditures (70.1) (63.3) (58.6) (90.0) (119.9) (85.6)


    Acquisitions, net of cash acquired
    Online Tutorial #5: How Do You Calculate A Company's Incremental Fixed Capital Needs?

    Incremental investment in fixed capital is another important value driver in an analysis of


    shareholder value. This session focuses on where to find the data, how to calculate historical fixed
    capital trends and how to project future fixed capital needs. As with previous sessions, we will use
    Domino's Pizza, Inc., as of September, 2020, as a case study. Readers who want to calculate
    incremental fixed capital while reading this tutorial may wish to download the accompanying
    spreadsheet.

    What Does Incremental Fixed Capital Mean?

    To understand what we mean by incremental fixed capital, let's break this phrase down into its
    component parts:

    Incremental. This means that we want to look at the additional cash a company annually invests
    in its long term operating assets.
    Fixed. This means we look at cash tied up in long term operating assets such as property, plant,
    and equipment (PP&E) and capitalized leases.
    Capital. This is the amount of cash a company has spend annually in fixed capital in order to run
    its business.

    For industrial companies, then, incremental fixed capital equals the cash a company invests
    annually in long term operating assets.

    We can calculate a company's annual investment in fixed capital by analyzing its cash flow
    statement. To calculate a company's gross fixed capital investments, we sum the following items:

    Capital expenditures
    Capitalized software costs
    Other investment activities, net
    Acquisitions, net of cash acquired

    However, before we finish, we need to deduct depreciation (found on the Cash Flow Statement in
    the "Cash flows from operating activities" section). This is because we want to calculate the cash
    invested above and beyond a company's annual depreciation. The underlying assumption is that
    depreciation is a rough estimate for how much a company must spend to maintain its physical
    assets. In other words, we consider only capital investments above and beyond depreciation as
    incremental.

    Case Study: Domino's Pizza as of September, 2020

    The following table summarizes calculations for Domino's:

                   Capital expenditures


              Acquisitions, net of cash acquired
         Total gross fixed capital investments
         Depreciation and amortization
    Incremental fixed capital investments
    Source: Domino's Cash Flow Statements can be found here.
    https://dominos.gcs-web.com/financial-information/sec-filings
    Note: This data should be entered into the "Inputs" worksheet of the "Online Tutorial 5.xlsx"
    spreadsheet.

    Building on this metric, we can calculate how much incremental fixed capital Domino's must invest
    to generate a dollar of new sales:

         Incremental fixed capital investments


              Total revenue
         Incremental revenue
    Incremental fixed capital investment rate

    Over this five year period, then, Domino's invested $189 million into its fixed capital in order to
    generate $1.6 billion in incremental sales. In other words, Domino's invested 11.6% of incremental
    sales into fixed capital.

    In the Price-Implied Expectations (PIE) analysis we perform in the book, we assume that Domino's
    will invest slightly under this amount at 10.0% of incremental sales (see page 92).
    2014 2015 2016 2017 2018 2019
    -70.1 -63.3 -58.6 -90.0 -119.9 -85.6
    0.0 0.0 0.0 0.0 0.0 0.0
    -70.1 -63.3 -58.6 -90.0 -119.9 -85.6
    35.8 32.4 38.1 44.4 53.7 59.9
    -34.3 -30.8 -20.4 -45.6 -66.2 -25.6

    2015 2016 2017 2018 2019


    -30.8 -20.4 -45.6 -66.2 -25.6
    2,216.5 2,472.6 2,788.0 3,432.8 3,618.8
    222.7 256.1 315.4 644.9 185.9
    13.9% 8.0% 14.5% 10.3% 13.8%
    Incremental Fixed Capital Investment Rate

    2014 2015 2016 2017 2018 2019

    Capital expenditures (70.1) (63.3) (58.6) (90.0) (119.9) (85.6)


    Acquisitions, net of cash acquired - - - - - -

    Total Gross Fixed Capital Investments (70.1) (63.3) (58.6) (90.0) (119.9) (85.6)

    Depreciation and amortization 35.8 32.4 38.1 44.4 53.7 59.9

    Net Fixed Capital Investments (34.3) (30.8) (20.4) (45.6) (66.2) (25.6)

    Total revenue 1,993.8 2,216.5 2,472.6 2,788.0 3,432.8 3,618.8


    Incremental revenue 222.7 256.1 315.4 644.9 185.9

    Incremental Fixed Capital Investment Rate 13.9% 8.0% 14.5% 10.3% 13.8%

    Incremental fixed capital over last 5 years (%) 11.6%

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